China's key stock index rose 0.38 percent to a two-month closing high in heavy trade on Thursday as expectations for high inflation pushed up metals, agriculture and other resource shares. The Shanghai Composite Index ended at 5,456.541 points, with gainers outnumbering losers by 461 to 402.
Turnover in Shanghai A shares was very active at 173.5 billion yuan ($23.9 billion), up from Wednesday's 138.8 billion yuan. "Money has been chasing companies that are likely to benefit from price hikes, such as agriculture and food," said Gao Lingzhi, analyst at Great Wall Securities Co.
The cabinet said on Wednesday that China still faced fairly large inflationary pressure and Beijing would temporarily intervene in goods markets to brake rising prices for basic necessities, and block rises in domestic energy prices for now.
The announcement helped to drag down shares in Hong Kong, because of fears that corporate profits would be capped. In the domestic stock market, however, investors interpreted the announcement mainly as a sign that inflation would remain high for a while, making it easier for companies to raise prices of a wide range of non-essential products.
Top steel maker Baoshan Iron and Steel Co ended up 2.65 percent at 19.37 yuan. Oil refiners slipped because curbs on domestic oil product prices could further hurt margins - Sinopec slid 2.79 percent to 23.70 yuan and PetroChina lost 0.84 percent to 30.56 yuan.
But the companies' A shares outperformed their H shares in Hong Kong, where Sinopec plunged more than 6 percent. Some traders said mainland Chinese investors had more faith in the government's willingness to compensate the oil refiners for their losses with subsidies.
Datang Power jumped 7.47 percent to 22.16 yuan, after saying its total power generation climbed 26.6 percent last year because of growing capacity and rising demand. China Eastern Airlines slid 3.16 percent to 19.63 yuan in the wake of Tuesday's shareholder vote that rejected a plan for Singapore Airlines to buy into it. Air China lost 1.55 percent to 28.02 yuan.